USDA getting into the loan guarantee business

Four biofuel projects are waiting for USDA loan guarantees that may not come. Image: Flickr / blmurch / CC-BY-SA

Though delays continue to plague the process, the USDA is set to offer loan guarantees for four different biofuels projects. These short term loan guarantees are intended to help jump-start United States biofuels. There is a conflict between the USDA and DOE, however, that may put these loans guarantees at risk.

USDA loan guarantees

The United States Department of Agriculture is expected to offer four short-term loan guarantees to biofuel projects. Called the “section 9003 program,” these loan guarantees are considered conditional. USDA secretary Tom Vilsack has been pushing the section 9003 programs as proof that the USDA can create jobs. These guarantees would allow four biofuels firms in states such as Texas to develop their business.

Emergency funding for biofuels

Though the USDA is trying to fund new biofuels projects with the section 9003 emergency funding, it is not yet certain. The Office of Management and Budget is saying that the loan guarantee program does not have enough money to justify all four guarantees. The Department of Energy is also lobbying to cut the USDA guarantee program out of the funding bills working their way through Congress. Originally, the funding was certain in the Omibus spending bill. However, the funding was cut out of that budget.

The basics of the USDA loan guarantee

The USDA’s loan guarantee program seeks to offer $10 in loan guarantees for every $1 of funding in the coffers. Should the four firms that are set to receive these loan guarantees default, the USDA will be on the hook to paying back these loans. The Republican-controlled Congress that will be convening in a few weeks is likely to pull funding from this program, among others. If this is the case, the four biofuels projects, which are projected to create several hundred jobs, are likely to not receive funding through traditional banks or alternative funding sources.